Sometimes, an Expense Is Really an Investment

My partner and I need contracts developed for our new venture. The venture requires knowledge of banking, financing and other securities laws. One of the attorneys we spoke with came from a well-respected Washington law firm.

The attorney met with my partner and one of our investors. My partner was impressed with the lawyer's knowledge, but then we got his engagement letter. An engagement letter is a document telling the reader what the service provider will charge for their services.

The letter stated that the lawyer my partner spoke with charges $550 an hour, but he is a bargain compared to the litigator who charges over $1,000 an hour. No, that isn't a misprint! That is the cost for a top-flight litigator.

The fee for an associate was $250 per hour, and the partner said he could delegate a lot of the work to the associate. I asked how much two contracts would cost, and without blinking an eye, he said, "Around $30,000 to $40,000."

I don't know about you, but 30 grand seems like a lot for some contracts. I ran this by my brother-in-law, who is a big-wheel securities attorney with a mutual fund giant. Mr. Wall Street, who I thought would say the fees were outrageous, said they were fair.

Then I emailed a friend who has run several public companies in the financial service space and asked her what she thought of the fee. Her response was something few entrepreneurs think of when they are staring at an enormous bill. She said, "Don't look at it like an expense, but as an investment."

Most entrepreneurs look at consultants and attorneys as necessary expenses, but not investments. Here I am, someone who has spent the last decade selling my time because I believed that I could provide a service that would make a difference to entrepreneurial companies, questioning whether to make this important "investment" in my company's future.

Any time you are looking at professional service bill, you have to ask yourself the following questions:

• Will this service make a difference in my success?
• Is the person providing the service the best professional for the job?